The pang of plant closings: hunting ways to relieve it

By
Robert Nelson, Special to The Christian Science Monitor /
July 12, 1982

Boston

When United States Steel Corporation shut down its Birmingham, Ala., plant two weeks ago, Robert Douglass of the city's chamber of commerce stated the obvious: ''We're certainly not pleased with the closing.'' He expects the city to lose $60 million annually in wages and purchases, as well as millions more in service-related industries.

With the nation in deep recession, plant shutdowns and the devastating effects they have on the areas around them have become more common. They have prompted Congress and state legislatures to consider laws limiting the damage or at least delaying it.

The Department of Labor estimates that of the unemployed, 25 percent - some 1 .5 million people - lost their jobs because of plant closings last year. According to Dr. Lou Ferman, director of the Institute of Labor and International Relations at the University of Michigan, 1 out of every 4 workers subject to a plant closing never returns to work. And 10 years ago, Dr. Ferman says, only 1 in 25 did not get a job later.

At present very few states have any kind of legal restraints on the closing of a plant. In the past two years, however, 68 bills attempting to place closing restrictions on companies have been introduced in 24 legislatures. Moreover, Congress is considering legislation that would require all companies to give employees two year's prior notice of a plant closing.

Experts, though, figure such legislation has little chance of passage. The key objection of the business community to pre-notification is the expense. First, a plant that is losing money might have to be kept in operation for two years. Second, it might prompt union demands for severance pay and retraining programs.

In a report given to the Congress and key Reagan administration officials, Richard B. McKenzie, a senior fellow of the Heritage Foundation, a conservative ''think tank,'' argues that limits on plant closings also damage the economy over the long run through inefficiency. Companies close plants in one area to move into areas with lower production costs. They fear that if they do not move, their competitors - which have taken advantage of the lower production cost areas - can offer buyers the same products at a lower price.

More liberal critics argue that while more workers are being laid off because of shutdowns - and facing tougher economic times than in previous years - few corporations are responding to the problem responsibly. In 1980, the president of the United Automobile Workers, Douglas Fraser, described plant closings as the most serious social problem of the next decade, and he stressed that ''employers just can't pack up and abandon a plant without regard to the workers and to the community in which that plant is located.''

Dr. Gary Hanson, head of the business and economic development division at Utah State University, says the effects of a shutdown tend to stun local communities. ''The ability of the community to respond is impaired,'' says Dr. Hanson, who coordinated a study of plant closings for the Department of Labor. Large industrial plants often supply a substantial proportion of property taxes in a community. When they close, the weight of that taxation falls on householders. Often it leads to fiscal cutbacks. Schools are one of the hardest-hit areas, he says.

Plant closings also drag down real estate markets, forcing property values to plunge and reducing purchasing power. ''Often people can't even pay their rent or a mortgage,'' Dr. Hanson notes. Sometimes an opportunity exists to prevent a plant closing. ''If (the community) had enough time to put together an alternative to closing, they might save the plant,'' he says. But he feels that all too often corporations ''turn a blinded eye on the workers and cut them off at the knees.''

Growing concern over the effects of plant closings led the Northeast-Midwestern Congressional Coalition last year to study alternative solutions. Virginia Mayer, an author of the study, describes it as an attempt to provide ''a guidebook, not a rule book, presenting strategies for this type of crisis.'' The study suggests:

* The community should look for indicators of a plant's closing before it happens. These might include a declining market for it products, worker layoffs, or weaknesses in management. Then it should seek alternatives to closing before it occurs.

* New ownership plans can be considered, especially the possibility of employee ownership.

Some 5,000 businesses are now operated under employee stock ownership plans in the United States. In April, for instance, the employees of General Motors Corporation plant in New Jersey purchased the plant for $53 million when faced with the threat of a closing. According to one report, productivity is up 80 percent and the number of defective manufactured products has dropped from 10 to 7 percent.

* Economic recovery strategies can be created, using both public and private-sector resources.

* Plants can be reconditioned for alternative operations. A plant can be retooled and the workers retrained to work on those tools.

There have already been a number of successful plant transformations. In Akron, Ohio, for example, Quaker Oats converted two cereal silos into a 260-room hotel and shopping plaza. International Silver transformed a Connecticut plant from producing silverware to casting precision tools.

Advancing technology, as well as recession, can be the cause of plant closings, notes Lou Ferman at the University of Michigan. By reindustrializing, resources are being invested to create new industries, but this means displacing the older ones. New technologies require less space and fewer workers. ''It's not just another recession,'' Dr. Ferman says; ''it's a technological revolution - a total reformation of the technological base.'' One result, he warns, will be more plant closings and a greater need to deal with them responsibly.